Commerce Ministry To Assess Trade Impact Of Iran-Israel Conflict In Stakeholder Meet

New Delhi, Jun 20 (KNN) The Ministry of Commerce will convene a stakeholder meeting on Friday to evaluate the effects of the ongoing Iran-Israel conflict on India's international trade operations. 

Commerce Secretary Sunil Barthwal will chair the session, bringing together representatives from shipping lines, export companies, container firms, and various government departments to discuss emerging challenges and potential solutions.

Industry participants have indicated that freight rate concerns will be a primary focus of the discussions. The meeting comes as exporters express growing concern that further escalation of the conflict could significantly disrupt global trade patterns and drive up both air and sea transportation costs. 

The potential impact on merchant vessel movements through critical maritime chokepoints, particularly the Strait of Hormuz and the Red Sea, has emerged as a key area of concern for Indian trade stakeholders.

The strategic importance of these waterways to India's energy security cannot be overstated. Approximately two-thirds of India's crude oil imports and half of its liquefied natural gas supplies transit through the Strait of Hormuz, which Iran has threatened to close. 

This narrow passage, measuring only 21 miles at its most constrained point, facilitates nearly one-fifth of global oil trade and represents a critical vulnerability for India, which relies on imports for more than 80 percent of its energy requirements.

Research from the Global Trade Research Initiative indicates that any closure or military interference in the Strait of Hormuz would precipitate sharp increases in oil prices, shipping costs, and insurance premiums. 

Such disruptions would likely trigger inflationary pressures, weaken the rupee, and complicate India's fiscal policy management. 

The organization's analysis underscores the potential for cascading economic effects stemming from regional maritime disruptions.

Tensions in the Red Sea region have intensified following Israel's military strikes on Houthi leadership positions in Yemen on June 14-15. These actions have heightened concerns about commercial shipping security in an area where Houthi forces have previously targeted merchant vessels. 

The attacks represent an expansion of conflict-related risks beyond the immediate theater of operations between Iran and Israel.

For India's export economy, Red Sea disruptions pose substantial risks. Nearly 30 percent of the country's westbound exports destined for Europe, North Africa, and the US East Coast traverse the Bab el-Mandeb Strait, which has become increasingly vulnerable to interference. 

The strait serves as a critical gateway connecting the Red Sea and Mediterranean Sea to the Indian Ocean, handling significant volumes of international commerce.

The current conflict, which began with attacks on Israel on October 7, 2023, has already demonstrated its capacity to disrupt global shipping patterns. 

Previous Houthi attacks on commercial vessels effectively halted cargo movement through Red Sea routes until US military intervention against the militants reduced the immediate threat to shipping. However, the recent escalation has renewed concerns about the stability of these crucial maritime corridors.

Statistical analysis reveals the extent of India's dependence on Red Sea shipping routes. Approximately 80 percent of India's merchandise trade with Europe utilizes this passage, along with substantial volumes of US-bound commerce. 

Combined, European and American markets account for 34 percent of India's total export volume, highlighting the potential economic impact of sustained disruptions.

The Red Sea corridor's global significance extends beyond India's specific trade interests. The waterway accommodates 30 percent of worldwide container traffic and facilitates 12 percent of global trade flows, making any disruption a matter of international economic concern.

(KNN Bureau)